Oil is officially back in a bear market

Markets Insider
Oil prices fell to seven-month lows on Tuesday after news of increases in supply by several key producers, a trend which has undermined attempts by OPEC and other producers to support the market through reduced output.

West Texas Intermediate crude oil futures settled at $43.23 per barrel, down more than 20% from its recent high, and thus meeting the definition of a bear market.

Both Brent crude, the internationl benchmark, and WTI are down from late May, when OPEC, Russia and other producers extended their limits on production until the end of March 2018.

"Recent data points are not encouraging," Morgan Stanley analysts said in a research note. "Identifiable oil inventories - both crude and product in the OECD, China and selected other non-OECD countries - increased at a rate of (about) 1 (million bpd) in Q1."

OPEC supplies jumped in May as output recovered in Libya and Nigeria, two countries exempt from the production reduction agreement.

Libya's oil production rose more than 50,000 bpd to 885,000 bpd after the state oil company settled a dispute with Germany's Wintershall, a Libyan source told Reuters.

Nigerian oil supply is also rising, industry figures show.

Exports of Nigeria's benchmark Bonny Light crude oil are set to reach 226,000 bpd in August, up from 164,000 bpd in July, loading program show.

"The increasing August export program in Nigeria and the jump in Libyan oil output should pressure oil prices further in the short term," said Tamas Varga, senior analyst at London brokerage PVM Oil Associates.

"If we get bearish U.S. oil statistics this week, we could see a test of $45 on Brent," Varga said.

U.S. oil production has been rising quickly this year, feeding the global glut. Data on Friday showed a record 22nd consecutive week of increases in U.S. oil drilling rigs. [RIG/U]

But Saudi Energy Minister Khalid al-Falih said the oil market is heading in the right direction and just needs time to rebalance, the London-based newspaper Asharq al-Awsat reported on Monday.